PROMISSORY NOTE
$1,600,000 January 1, 1997
FOR VALUE RECEIVED, MTL ACQUISITION, INC., an Arizona
corporation, its successors and assigns ("Maker"), hereby promises to pay to the
order of MOTORSPORT TRADITIONS LIMITED PARTNERSHIP, a North Carolina limited
partnership or its successors or assigns ("Payee"), at the office of Payee,
located at 2835 Armentrout Drive, Concord, North Carolina 28205, the principal
amount of $1,600,000, together with interest on the principal balance
outstanding hereunder, from (and including) the date hereof until (but not
including) the date of payment, at the interest rate specified below, in
accordance with the following terms and conditions:
1. Stated Interest Rate. Except as provided in Section 2
below, the principal balance outstanding hereunder shall bear interest, until
fully paid, at 4% per annum (the "Stated Interest Rate").
2. Default Interest Rate. The Default Interest Rate shall be
12% per annum. The principal balance outstanding hereunder from time to time
shall bear interest at the Default Interest Rate from the date of the occurrence
of an Event of Default (as hereinafter defined) hereunder until the earlier of
(a) the date on which the principal balance outstanding hereunder, together with
all accrued interest and other amounts payable hereunder, is paid in full; or
(b) the date on which such Event of Default is timely cured.
3. Payments. This Note shall be payable as follows:
(a) Twenty-three (23) equal monthly installments of
principal of Sixty-six Thousand Dollars ($66,000.00) each, due and payable on
the first day of each month, commencing on February 1, 1997, together with
interest on the unpaid balance at the Stated Interest Rate.
(b) All unpaid principal and accrued but unpaid
interest thereon and all other amounts payable hereunder shall be due and
payable on December 31, 1998.
4. Prepayment. Maker may prepay all or any portion of the
interest and the unpaid principal balance of this Note at any time, or from time
to time, without penalty or premium.
5. Application and Place of Payments. Payments received by
Payee with respect to the indebtedness evidenced hereby shall be applied in such
order and manner as Payee in its sole and absolute discretion may elect. Unless
Payee otherwise elects, payments received by Payee shall be applied first to
accrued and unpaid interest, next to the principal balance then outstanding
hereunder, and the remainder to Additional Sums (as hereinafter defined) or
other costs or added charges provided for in this Note. Payments hereunder shall
be made at the address for Payee first set forth above or at such other address
as Payee may specify to Maker in writing.
6. Events of Default; Acceleration. The occurrence of any one
or more of the following events shall constitute an "Event of Default"
hereunder, and upon such Event of Default, the entire principal balance
outstanding hereunder, together with all accrued interest and other amounts
payable hereunder, at the election of Payee, shall become immediately due and
payable, without any notice to Maker, provided that in the case of any of the
Events of Default in paragraphs (b), (c) or (d) below, the remainder of the debt
evidenced hereby shall automatically become due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Maker:
(a) Nonpayment of principal, interest, or other
amounts when the same shall become due and payable hereunder, and Maker does not
cure such failure to pay within three days after the date such payment is due;
or
(b) The failure of Maker to comply with any provision
of this Note; or
(c) The dissolution, winding-up, liquidation or
termination of the existence of Maker or the sale or disposition of
substantially all of the assets of Maker's business; or
(d) The making by Maker of an assignment for the
benefit of its creditors; or
(e) The appointment of a receiver for Maker or the
involuntary filing against Maker, which is not stayed or dismissed within 30
days of filing, or the voluntary filing by Maker of a petition or application
for relief under federal bankruptcy law or any similar state or federal law.
(f) An Event of Default by Maker under the License
Agreement of even date between Maker and JG Motorsports, Inc., the License
Agreement of even date among Maker, JG Motorsports, Inc., and Hasbro, Inc. (to
the extent such default arises from circumstances involving Maker rather than
Hasbro, Inc.), or the License Agreement dated as of September 1, 1996 between JG
Motorsports, Inc. and Creative Marketing and Promotions, Inc. (to the extent
such default arises from circumstances occurring after January 1, 1997).
7. Contracted For Interest.
(a) Maker agrees to pay an effective contracted for
rate of interest equal to the rate of interest resulting from all interest
payable as provided in this Note, plus the additional rate of interest resulting
from the Additional Sums. The Additional Sums shall consist of all fees,
charges, goods, things in action, or any other sums or things of value (other
than interest payable as provided in this Note) paid or payable by Maker,
pursuant to this Note, that may be deemed to be interest for the purpose of any
law of the state of Arizona that may limit the maximum amount of interest to be
charged with respect to this lending transaction. The Additional Sums shall be
deemed to be interest for the purposes of any such law only.
(b) Maker understands and believes that this
transaction complies with the usury laws of the state of Arizona; however, if
any interest or other charges in connection with this transaction are ever
determined to exceed the maximum amount permitted by law, then Maker agrees that
(i) the amount of interest or charges payable pursuant to this transaction shall
be reduced to the maximum amount permitted by law; and (ii) any excess amount
previously collected from Maker in connection with this transaction, which
exceeded the maximum amount permitted by law, will be credited against the
principal balance then outstanding hereunder. If the outstanding principal
balance hereunder has been paid in full, the excess amount paid will be refunded
to Maker.
8. Costs of Collection. Maker agrees to pay all costs of
collection, including, without limitation, attorneys' fees, whether or not suit
is filed, and all costs of suit and preparation for suit (whether at trial or
appellate level), in the event any payment of principal, interest, or other
amount is not paid when due, or if at any time Payee should incur any attorneys'
fees in any proceeding under any federal bankruptcy law (or any similar state or
federal law) in connection with the obligations evidenced hereby. In the event
of any court proceeding, court costs and attorneys' fees shall be set by the
court and not by the jury and shall be included in any judgment obtained by
Payee.
9. No Waiver by Payee. Maker hereby waives presentment,
protest, notice of dishonor, and notice of acceleration of maturity. No failure
to accelerate the debt evidenced hereby by reason of default hereunder,
acceptance of a past-due installment, or other indulgence granted from time to
time shall be construed as a novation of this Note or as a waiver of such right
of acceleration or of the right of Payee thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable law. No
extension of the time for payment of this Note shall operate to release,
discharge, modify, change or affect the original liability of Maker under this
Note, either in whole or in part, unless Payee agrees otherwise in writing.
Maker agrees to continue to remain bound for the payment of principal, interest,
and all other sums due under this Note notwithstanding any changes by way of
release, surrender, exchange, modification, substitution of, failure to perfect
or maintain perfection of any security for this Note. No
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delay or failure of Payee in exercising any right hereunder shall affect such
right, nor shall any single or partial exercise of any right preclude further
exercise thereof.
10. Governing Law. This Note shall be construed in accordance
with and governed by the laws of the state of Arizona without regard to the
choice of law rules of the state of Arizona.
11. Time of Essence. Time is of the essence of this Note and
each and every provision hereof.
12. Conflicts; Inconsistency. In the event of any conflict or
inconsistency between the provisions of this Note and the provisions of any one
or more of the other documents executed in connection with this transaction, the
provisions of this Note shall govern and control to the extent necessary to
resolve such conflict or inconsistency.
13. Amendments. No amendment, modification, change, waiver,
release, or discharge hereof and hereunder shall be effective unless evidenced
by an instrument in writing and signed by the party against whom enforcement is
sought.
14. Severability. The invalidity of any provision of this Note
or portion of a provision shall not affect the validity of any other provision
of this Note or the remaining portion of the applicable provision.
15. Binding Nature. The provisions of this Note shall be
binding upon and inure to the benefit of Maker and Payee and their respective
heirs, personal representatives, successors, and assigns, as applicable.
16. Notices. All notices, requests, demands, and other
communications required or permitted under this Note shall be in writing and
shall be deemed to have been duly given, made, and received when delivered
against receipt, upon receipt of a facsimile transmission, or upon actual
receipt of registered or certified mail, postage prepaid, return receipt
requested, addressed as set forth below:
If to Maker:
2401 West First Street
Tempe, Arizona 85281
Attention: Fred W. Wagenhals
Phone: (602) 517-3710
Fax: (602) 967-1403
with a copy:
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
Suite 1100
One East Camelback
Phoenix, Arizona 85012
Attention: Robert S. Kant, Esq.
Phone: (602) 263-2606
Fax: (602) 263-2900
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If to Payee:
2835 Armentrout Drive
Concord, North Carolina 28205
Attention: Kenneth R. Barbee
Phone: (704) 784-2700
Fax: (704) 784-2707
with a copy to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
Attention: Stokley G. Caldwell, Jr., Esq.
Phone: (704) 377-8332
Fax: (704) 378-4000
Either party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this section for the giving of notice.
17. Construction. Maker and Payee participated in the drafting
of this Note, and this document was reviewed by the respective legal counsel for
Maker and Payee. The normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be applied
to the interpretation of this Note. The language of this Note shall be construed
as a whole according to its fair meaning. The word "include(s)" means
"include(s), without limitation," and the word "including" means "including, but
not limited to." No inference in favor of, or against, Maker or Payee shall be
drawn from the fact that one party has drafted any portion hereof.
IN WITNESS WHEREOF, Maker has executed this Note as of the
date first set forth above.
MTL ACQUISITION, INC.
By:______________________________________
Its:_____________________________________
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GUARANTEE
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The undersigned, Action Performance Companies, Inc.
("Guarantor"), hereby unconditionally guarantees the performance, including
without limitation, the payment obligations (the "Obligations"), of MTL
Acquisition, Inc. ("Maker") under the $1,600,000 promissory note of MTL
Acquisition, Inc. dated January 1, 1997 (the "Note") payable to Motorsport
Traditions Limited Partnership ("Payee"). The undersigned agrees that the term
"maker" in the Note shall include the undersigned with respect to any
obligations, events of default, or similar matters set forth in the Note.
The Guarantor hereby expressly waives: (a) notice of
acceptance of this Guaranty by Payee and of all extensions of credit to Maker by
Payee; (b) presentment and demand for payment of any of the Obligations; (c)
protest and notice of dishonor or of default to the Guarantor or to any other
party with respect to the Obligations or with respect to any security therefor;
(d) notice of Payee's obtaining, amending, substituting for, releasing, waiving
or modifying any security interest, liens, or encumbrances now or hereafter
securing the Obligations, or Payee's subordinating, compromising, discharging or
releasing such security interests, liens or encumbrances; (e) to the extent
permitted by applicable law, all other notices to which the Guarantor might
otherwise be entitled; (f) any requirement that Payee protect, secure, perfect
or insure any security interest, lien or other charge or encumbrance on any
property; (g) demand for payment under this Guaranty; and (h) any right to
assert against Payee, as a defense, counterclaim, set-off, or cross-claim any
defense (legal or equitable), set-off, counterclaim or claim that the Guarantor
may now or hereafter have against Maker.
The Guarantor agrees that this Guaranty may be enforced by
Payee without the necessity at any time of resorting to or exhausting any other
security or collateral and without the necessity at any time of having recourse
to the Note or any collateral now or hereafter securing the Obligations or
otherwise, and Guarantor hereby waives the right to require Payee to proceed
against Maker, or any co-guarantor or to require Payee to pursue any other
remedy or enforce any other right. The Guarantor further agrees that nothing
contained herein shall prevent Payee from suing on the Note or foreclosing its
security interest in or lien on any collateral now or hereafter securing the
Obligations or from exercising any other rights available to them under the
Note, the Asset Purchase Agreement between Maker, Guarantor and Payee of even
date herewith, or any other document or instrument executed in connection with
the Obligations if neither Maker nor the Guarantor timely perform the
obligations of Maker thereunder, and the exercise of any of the aforesaid rights
and the completion of any foreclosure proceedings shall not constitute a
discharge of any of the Guarantor's obligations hereunder; it being the purpose
and intent of the Guarantor that the Guarantor's obligations hereunder shall be
absolute, independent and unconditional under any and all circumstances. Neither
the Guarantor's obligations under this Guaranty nor any remedy for the
enforcement thereof shall be impaired, modified, changed or released in any
manner whatsoever by an impairment, modification, change, release or limitation
of the liability of Maker or any co-guarantor or by reason of Maker's or any co-
guarantor's bankruptcy or insolvency. The Guarantor acknowledges that the term
"Obligations" as used herein includes any payments made by Maker to Payee and
subsequently recovered by Maker or a trustee for Maker pursuant to Maker's
bankruptcy or insolvency.
ACTION PERFORMANCE COMPANIES, INC.
By:______________________________________
Its:_____________________________________
Dated: January 1, 1997
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